The Supreme Court on 14 March notified a nine-judge Constitution Bench to revisit a longstanding question in Indian labour law: What legally counts as an “industry?”
The interpretation of this single word matters because it determines which organizations fall under labour laws and which workers can access labour dispute mechanisms in India.
A nine-judge bench led by Chief Justice Surya Kant will begin hearing the matter on 17 March and conclude arguments on 18 March. The bench includes Justices B.V. Nagarathna, P.S. Narasimha, Dipankar Datta, Ujjal Bhuyan, Satish Chandra Sharma, Joymalya Bagchi, Alok Aradhe and Vipul M. Pancholi.
Mint explains why the court is revisiting the definition of industry and what the ruling could mean for labour rights in India.
Why has the Supreme Court constituted a nine-judge bench?
In 1978, a Supreme Court ruling gave a very broad meaning to the term “industry” under the Industrial Disputes Act 1947. Over the years, employers and institutions argued that this interpretation created uncertainty about whether organizations such as government departments, hospitals, universities and welfare bodies should fall under labour laws.
The 1978 judgment was delivered by a seven-judge bench and can only be reconsidered by a larger bench.
The issue resurfaced in 2005 in the case of State of Uttar Pradesh v. Jai Bir Singh, where a five-judge Constitution Bench observed that the earlier interpretation had created confusion about the scope of the term “industry.” Because a five-judge bench could not revisit a ruling delivered by a seven-judge bench, the matter has now been referred to a nine-judge Constitution Bench for a final answer.
What did the Supreme Court say in its 1978 ruling?
The key ruling under review is the landmark judgment in the Bangalore Water Supply and Sewerage Board v. A. Rajappa case. The seven-judge bench including Justices V.R. Krishna Iyer, P.N. Bhagwati and Y.V. Chandrachud gave a broad interpretation to the word “industry”.
The court said any organized activity where employers and workers work together to produce goods or provide services that meet human needs can be treated as an industry. Importantly, the court clarified that profit-making is not necessary for an organization to fall within this definition. This meant even charitable institutions, social organizations and welfare bodies could be classified as an industry.
The judgment introduced what later became known as the “triple test”—systematic activity, cooperation between employers and employees, and the production or distribution of goods or services.
As a result, institutions such as hospitals, educational institutions, clubs and certain government bodies could also be treated as industries. This allowed workers in these institutions to raise disputes and seek remedies before labour courts and industrial tribunals.
How are labour disputes governed in India now?
Labour disputes are governed under the Industrial Relations Code, 2020, which consolidates three earlier laws—the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.
Under the Industrial Disputes Act, a structured system had been created to resolve conflicts between employers and workers through conciliation, arbitration and adjudication by labour courts and industrial tribunals. It also regulated issues such as strikes, lockouts, layoffs, retrenchment and closure of establishments.
The Industrial Relations Code, 2020, broadly retains the earlier understanding of “industry” but provides clearer exclusions such as sovereign government functions and domestic services.
It also introduced changes, including raising the threshold for government approval for layoffs and closures from 100 workers to 300, recognizing fixed-term employment and introducing structured collective bargaining through negotiating unions or councils.
What could the ruling mean for labour rights?
According to lawyers, if the nine-judge bench overturns or narrows the 1978 interpretation of “industry”, sectors that currently fall under labour laws may be excluded from their scope.
Alay Razvi, founding partner of Accord Juris, said narrowing the definition would primarily exclude sovereign or welfare-oriented functions, including hospitals, educational institutions, charitable trusts, clubs and municipal services. Non-profit institutions, universities and certain state-run welfare schemes such as water boards could also fall outside the ambit of the Industrial Disputes Act 1947.
“Disputes may become costlier and slower without specialized labour courts, eroding protections against unfair dismissal. Public sector unions may lose bargaining power, while non-profits may gain flexibility in hiring and firing, leaving workers more vulnerable,” Razvi noted.
According to Arka Majumder, who handles employment law at Argus Partners, if the judicial narrowing of the definition of "industry" significantly curtails the industrial code's reach, the legislature may need to revisit its definitional framework, potentially aligning it with the broader 'establishment"-based approach adopted by the three other labour codes, or introduce a revised statutory definition that addresses the court's concerns while preserving adequate worker coverage.
“In sum, while the court's reconsideration may not disrupt the broader labour reform agenda in its entirety, it has the potential to create a meaningful fault line within the new code structure – one that employers, policymakers and labour practitioners will need to navigate carefully,” Majumder said.
What does this mean for employers?
For employers, narrowing the definition could reduce the compliance burden in excluded sectors.
"For employers, the new definition of 'industry' under the IR Code may reduce regulatory obligations in certain sectors, particularly in public or non-profit institutions,” said Vivek Daswaney, who heads the employment and labour law vertical at Economic Laws Practice. “However, it could also create legal uncertainty during the transition to the new labour codes, requiring organizations to reassess employment structures, dispute resolution mechanisms, and compliance frameworks.”
However, Akshat Pande, managing partner at Alpha Partners, cautioned that employers in excluded sectors may also face new risks.
“Employers could face unregulated employee grievances and ‘wildcat strikes’ without the structured dispute resolution machinery provided under labour law,” he said.